Hyperinflation and authoritarianism have been long-standing issues in Venezuela, making it a prime example for a national cryptocurrency model. Tech pundits have hailed the country as a great opportunity for Bitcoin and digital asset adoption, yet a recent report from Chainalysis showed Venezuela ranking fifth for total crypto value received in Latin America, and not even making the top 20 worldwide. So, what’s going on?
The report, the 2023 Global Cryptocurrency Adoption Index, focused on Latin America, highlighting the political situation and rampant inflation in Venezuela as a key factor in its “unique crypto utility”. Javier Bastardo, organizer of Satoshi in Venezuela and Bitfinex’s Bitcoin ambassador to Latin America, however, isn’t surprised by the numbers. He believes that Venezuelans are more interested in the global reserve currency, and that the narrative that hyperinflated countries will move to Bitcoin out of necessity is false. He notes that people are more likely to use stablecoins before Bitcoin.
This view was echoed by Kevin Hernández, founder of Venezuelan media outlet Criptodemia and author of “My First Days in Bitcoin”. He argued that Venezuelans don’t really want cryptocurrencies, but are instead looking for access to dollars. The actual economic uncertainty has caused a demand for products “with less friction”, such as Zinli, which grants easy access to dollars.
Chainalysis pointed to a second factor that should drive the Venezuelan crypto economy: its authoritarian rule. Leopoldo López, an opposition leader, spoke of using crypto to provide financial aid for 65,000 doctors during the COVID-19 pandemic, and how digital assets have served as a tool of resistance for the regime.
Bastardo and Hernández, however, noted that this is only a “half truth”. They agreed that crypto is an alternative to an economy controlled with an iron fist, but its usage by the population is minor. It’s clear that people are just looking for dollars. Bastardo mentioned that 92.5% of people use centralized exchanges to access crypto, showing Latin America’s dominance in this area. Jazmín Jorquera, Chief Operations Officer for Buda.com, attributed this to centralized exchanges offering an easy and simple experience, better liquidity, and trust factor.
Mexico is the one exception to the regional dominance of centralized exchanges, falling a couple of percentage points below the global average. Lorena Ortiz, founder of the Bitcoin Embassy Bar in Mexico City and community master for Fedi, believes this is due to the nation having a booming tech scene with savvy youth, and many different platforms that service the country. She also noted that Latin Americans don’t mind using these centralized platforms, as they don’t pay as much tax as other parts of the world.
Ultimately, Venezuelans are more interested in the global reserve currency, and this is mirrored throughout Latin America. People are simply looking for something easy with which they can access dollars.
